2010 (9) TMI 560 - HC - Income Tax

Capital gains Sale of agricultural land - land was shown in the revenue record to be used for agricultural purpose and no permission was ever obtained for non-agricultural use by the respondents No agricultural income shown in return not material - land was agricultural land and its sale did not invite the payment of capital gain Gains from sale exempt

Summary

Issues:
1. Whether the land in question can be classified as agricultural land for tax purposes?

Analysis:
The case involved two tax appeals where the respondents, a wife and husband, were co-owners of a piece of land purchased as agricultural land but later sold for a significant profit. The Assessing Officer deemed the land to have non-agricultural potential due to its sale for a beach resort and assessed the profit as capital gains. The respondents contended that the land was agricultural, exempting them from tax liability. The Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal sided with the respondents, leading to an appeal by the Revenue.

The main issue revolved around determining whether the land qualified as agricultural land, thus exempt from capital gains tax. The Revenue argued that the sale of the land for a beach resort within two years of purchase indicated non-agricultural intentions. They also highlighted the absence of agricultural income during this period. However, the court noted that the land was recorded as agricultural in revenue records and no permission for non-agricultural use was obtained by the respondents. The court emphasized that lack of surplus from agricultural activities does not negate the land's agricultural classification. Citing relevant legal provisions, the court upheld the lower authorities' findings that the land was indeed used for agricultural purposes.

In conclusion, the court dismissed the appeals, stating that the findings were based on correct principles of law and evidence appreciation. The court referenced previous decisions with similar facts where it was held that the land was agricultural, reinforcing the current judgment's validity. Therefore, the court found no merit in the Revenue's appeals and dismissed them with costs.